| Any business, other than retail, must offer | | | | you will need buckets for 0-30 days, 31-60 days, |
| payment terms to its customers in order to be | | | | 61-90 days, 91-120 days and over 120 days. |
| competitive. Payment terms on cash due from | | | | Insert the amount owed by a customer based |
| customers - also known as accounts receivables - | | | | into the appropriate buckets and you have an |
| are loans that you extend to customers. By | | | | easily digested view of how your business cash |
| offering these loans, you are giving customers the | | | | flow can be impacted by receivables. |
| ability to manage their cash flow. This is important | | | | A healthy A/R report should show the majority |
| in commercial transaction because the ticket price | | | | of cash outstanding in the 0-30 day bucket. If a |
| of such items is typically larger and your | | | | customer has amounts due in multiple buckets, it |
| customers are likely offering payment terms to | | | | suggests they are having difficulty paying bills. |
| their customers, as well. You probably already | | | | Contact them as soon as possible to discover |
| understand that there is an impact from these | | | | what the problem is, and work out a payment |
| "loans" on your business. The more receivables | | | | plan to get them back on track. Several |
| that remain unpaid, the tougher it is for you to | | | | customers with amounts that are late suggest |
| purchase materials and pay your own obligations. | | | | that you may need to tighten your overall |
| For this reason, accountants regularly run an | | | | collection practices or even consider outsourcing |
| Accounts Receivables Aging report. This report | | | | accounts receivables. Large amounts past due, |
| can be created manually, although a lengthy | | | | whether concentrated in a small group of |
| customer list can make the process time | | | | customers or spread over several, means that |
| consuming. The good news is that business | | | | your business is suffering and it is definitely time |
| accounting packages will include automatic | | | | to seek help. There are many companies that |
| generation of this report as a standard feature. | | | | specialize in commercial debt collection. These |
| An A/R aging report should be laid out with | | | | experts can help you recover the money owed -- |
| customers on the vertical axis and payment | | | | often for a modest percentage of the total |
| buckets along the horizontal. Buckets should be | | | | amount owed -- while helping you maintain your |
| multiples of your standard payment term cycle. In | | | | customer relationships. |
| other words, if your terms are net 30 days, then | | | | |